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Total Rewards System for Geico

Introduction

Benefits and rewards stand out as important components of employer-employee relationship where the employee provide their workers with financial protection and other programs that facilitate access to healthcare and support work-life balance. Geico has not been left behind in this benefits conversation for it has a total rewards framework with which it channels benefits to its employees. This paper explores Geico and its total rewards framework. It ultimately presents recommendations (as well as their justifications) on how the framework could be improved.

Geico Description

Geico- Government Employees Insurance Company is a wholly-owned subsidiary of Berkshire Hathaway. Headquartered in the US, Maryland, it deals in the provision of life, vehicle and property insurance services.  Some of the people targeted and covered by its services include employees of the US government as well as military personnel among others. It has a number of affiliate companies through which it provides its services.

Capabilities

Its main capabilities include:

• Technological capabilities including ever-expanding internet capabilities: These have allowed the company to excel through avenues like video conferencing
• Strong customer outreach programs that have seen it get significant market share. It has been able to achieve one of the highest numbers of policymakers and shareholders for a company of its kind (Geico, 2015)
• Large work force that makes it easier to achieve organizational objectives.
• Ability to conduct aggressive marketing efforts

Goals and Objectives

Geico seeks to market and offer ‘quality personal insurance services at a price advantage’ by employing direct response mechanisms, more so through its field representatives (Geico, n.d). The company also seeks to provide its customers with the best services, giving them ‘a peace-of-mind guarantee’ of the safety of their income and assets, or simply excellent financial protection (Geico, 2015).

Values

Geico’s values have been summarized as exemplification of:

• Integrity
• Service
• Growth (Farren, 2013).

Core Competencies

• Strong reputation: it is the largest insurer in the state of New York and is among the top three in the US.
• Successful marketing strategies and campaigns.
• Enjoys great brand recognition: most people are familiar with its name and icon and can therefore identify with it.
• Is committed to meeting customer needs and shows genuine concern for what customers want.

Total Rewards Model

Total Rewards Philosophy

True as it were, the best employers are considered those that engage and leverage top management to reinforce with other members/employees of the organization the total of value of the offerings of the organization, thus encompassing both intangible and tangible rewards. As such, the total rewards philosophy emerges as an important tool to be applied in the process. Usually, a good total rewards philosophy would be made up of these key components: Compensation, learning opportunities, benefits, and work environment.  Success for any organization would require that these components, hence the total rewards philosophy, are customized or tailored to specific objectives, and strategies of an organization. Gieco appears to have done this very well.

Geico’s Current rewards Philosophy

Gieco’s current total rewards model is as encompassed by its different programs geared towards improving the welfare of employees. In its simplest, the model is centered on better pay incentives (or aggressive salary offerings), career opportunities and development, and recognition of employee excellence. Reward programs such as Your Health and Well-being, Associate Assistance Program, Leave and Time Off programs, and Building Your Financial Future are some of the most notable in its employee rewards and welfare improvement strategy. It is considered crucial to explore specific aspects of the philosophy by scrutinizing the offerings of specific programs.

As regards salary offerings, note is taken that the company offers aggressive salary packages that surpass those offered by other firms in the same industry. Indeed, the company has given consideration for the merits of job satisfaction through better pay and it thus ensures all employees, right from subordinates to top executives, get compensation that matches their skills, knowledge and experience. More importantly, entry-level and junior employees have not been ignored in better salary packages. To ensure reward offerings in terms of pay are based on an employee’s skills and experience, the firm has invested in mechanisms for evaluating how much worth an employee’s service is in terms of monetary value.  In this respect, the total rewards philosophy of Geico seeks to reward employees based on merit. In other words, the more skillful and experienced an employee is, the more he or she is likely to benefit.  While such consideration can be assumed to be a counter-measure against other companies that pay their employees well, it also carries another benefit as it helps in determining budgetary allocations and general company planning (Holley et al., 2012).       

Another category of offerings of the firm’s reward philosophy is the improvement, promotion, and development of careers and contextual opportunities. This has been spelt out in its Development and Career Opportunities program. Through it, Geico strives to sustain career opportunities by, for instance, ensuring that employees take placements in the company where they can optimally apply their skills, knowledge, and experience. As Ruddy (2007) explains, it is imperative that organizations deploy staff in positions where they can bring out their best hence enhancing organizational performance. Geico appreciates the importance of assigning employees tasks where they find their skills relevant and applicable.  In addition, the firm is keen to ensure its employees are constantly refreshing and expanding their skills to match the ever-expanding job requirements, a development mostly prompted by changing customer needs. In this regard, employees are offered training opportunities at Geico University. This not only improves the skill level of employees but also has wide implications as far as organizational performance is concerned.

Also central in the firm’s reward philosophy is recognition of employee excellence through the Performance and Recognition program. Ruddy (2007) elevates individual performance as being crucial to the overall organization performance and explains the need to sequentially evaluate it so as to gain insight into the firm’s achievements and the manner such achievements have been made. By evaluating and recognizing performance, Geico is able to pay attention to the exceptional deeds and acts of employees at the individual level. This goes a long way in boosting the morale and confidence of employees.  The company has been able to use this recognition (and therefore reward) aspect to its advantage as it makes usually makes public those deeds of excellence that have been recognized. By so doing, it has cultivated a culture of healthy competition as every employee wants to do their best and earn recognition for excellence.

An even more important offering of Geico’s rewards philosophy is the quest to improve the work-life of employees.  Through Work-Life, the firm ensures employees strike a balance between work and other aspects of life such as family life. It has put in place an array of policies and practices that seek to ensure employees have the best chance to excel not just at work but also in their family lives. Specific emphasis is placed on events in the life of an employee that are likely to affect his or her performance at work, hence impacting the performance of the company at large.  For instance, need may arise for an employee to take a leave to attend to family matters  or just relax and bring down the pressure generated at work; the company readily considers and grants such. In general, whatever endeavor employees regard as important for their general welfare and success in life, Geico readily considers and supports them.

Workforce Segmentation

Concerning workforce segmentation, reference is made to what is commonly known as the ‘rule of the vital few’ postulating that a minority of inputs, effort, or causes more often than not yields a majority of outputs, rewards, or results. This rule is commonly applied in an array of business practices such as process and quality improvement approaches where a few issues that compromise quality the most are identified and addressed. In the context of market needs, the desires and wants of a few vital customers who bring the business most profit and revenue are identified and met. Likewise in workforce segmentation, human resource executives attest to the fact that organizations have a few vital employees whose input has the most dominant and significant impact on the organizational performance.  Usually, these employees are those who excel most in their duties and responsibilities hence bring the firm most revenue. It is imperative that organizations are able to identify them so as to be better informed on how to differentiate the way they are managed, rewarded, and engaged.

Considering Geico’s nature of business, it can be deduced that those employees who come in direct contact with the clients are more likely to determine which way business goes because of their ability to influence client-company relations in their positions. Therefore, it is important that they are specially considered as far as the total rewards program is concerned. Another segment worth special consideration is that of the employees in the operations department since they are the core of processing and handling customer needs and services. It would be important to engage more these two segments of the workforce as doing so would bring the company competitive advantage. After all, such employee engagement is paramount during these hard economic times. Such engagement would give insight into employee needs so that the same can be taken into account while designing or altering the total rewards program.

Requisite Capabilities

The capabilities that Geico requires for success include:

• More aggressive marketing strategies even in the face of competition.
• Extensive customers outline programs.
• Viable employee retention mechanisms.
• Better pricing tools: This would be needed for timely accomplishment of contextual goals and objectives such as those defined by its marketing strategies. Indeed, these would be necessary since through more competitive pricing, Geico would have the ability to continue offering the wide array of its coverage options. Specific applications of these tools would include monitoring the price models and insurance offerings of competitors so that the company can know how to offer the best deals thus avoid losing current and prospective customers to competitors.
• Better training for employees: While it cannot be disputed that hiring procedures at the company often root for competent staff, many operational dynamics in business are changing from day to day, for instance with evolving technology. Geico would need to periodically refresh and update the knowledge and skills of its employees so that they are up to speed with those of the labor market.

Recommended Changes and Justification

Harmonizing Skills of Employees

While implementing the various offerings as contained in the Careers and Opportunities program, it would be crucial for Geico to incorporate aspects geared to not only improving their skills level but also harmonizing such skills to be in line wider organizational strategies and objectives, whose deliverability they should enhance. This strategic change is supported by authors such as Silzer & Dowell (2010) and Martinez-Fernandez et al. (2011). Right from the point of hiring to subsequent training or skill enhancement, efforts should be made to make sure what is being offered is in line with company objectives and the strategies laid down towards their achievement. It would also be imperative in the same context to understand the needs of employees, not just in terms of skills but also in other aspects. Even away from rewards, it makes sense to have employees understand that the employer is concerned about their ability to perform their duties. How far has the organization gone in ensuring that they can deliver? When employers know they have the support of the employer even in terms of delivery they are more likely to be loyal and more committed.

In the context of Careers and Opportunities, a risk reward program would come in handy so that employees’ compensation levels match their risk, sacrifice, and commitment. This recommendation is based on the assertion that the more costly a certain skill set is the more production is likely to be enhanced.

Ensuring Flexibility of Offerings/Packages

Central to the current total rewards system is a benefits program that entails a wide range of benefits and incentives that employees can access. They include but are not limited to vision, dental and general health coverage. Physical fitness center/gym membership and the LTD (long term disability) plan are some of the most notable initiative under Your Health and Wellbeing. While these are appreciated, note is taken that there are aspects that need periodical changes due to the uncertainty characterizing other dynamics such as the cost of health (hence rising insurance cost) and the general living. Therefore, there is need to make the programs/offerings more flexible so that what trickles to the employees is reflective of the economic situation. The point is to make them as adjustable and realistic as possible.

Compensating more handsomely for overtime and foregone leaves

The current pay packages and benefits may be aggressive and attractive, but these aspects can be weighed with much relativity. This is more so the case considering that the cost of living is ever rising, a development more often than not prompted by occasional financial crises. As such, pay packages may be attractive but at the end of the day be having no significant impact on the wellbeing of employees. Need arises to find ways of improving what the employees take home at the end of the day, either in regular packages or additional incentives. One such way would be to compensate more handsomely for extra hours worked or foregone leave days. That way, employees would reap extra rewards and as such compliment their other incentives such as health that would not be sufficient in the face of the current economic hard times.

Adjust the Work-Life Program and Enable more Flexibility for Employees

While appreciation is accorded to the manner Geico has made efforts to promote employee welfare by assisting them strike a balance between work and family life, it is thought more would be achieved in the rewards narrative if the program was adjusted to allow employees more flexibility such as the ability to work from home.  Another option would be the ability to work from other places not necessarily the formal designated offices. This would enable them to cut off on expenses such as travel costs while giving them the chance to nurture social and familial bonds.

Ensure Inclusivity of the Performance and Recognition Program

Currently, the probability of junior employees getting recognition for exceptional performance is low. A shift of policy to pay attention to subordinates and their small actions would ensure that those deeds at the junior level which have huge impacts on the organization are recognized. It would be interesting to see a cleaner get recognition for keeping the boardroom exceptionally clean or a receptionist for performing her duties to the letter. Indeed, the program needs to be more inclusive so that everyone is motivated, knowing that they stand an equal chance of being recognized and appreciated.

Opportunities Presented by Program and Risks of not Implementing

Indeed, the total rewards program changed in the recommended manner would have an array of benefits to not only Geico, but also the employees. Chief among them would be a highly motivated workforce whose commitment to work would ultimately lead to improved organizational performance. The opportunities presented by the program are as would be presented by different workplace outcomes like job satisfaction and loyalty. Contextual risks would revolve around the missed opportunities and other negative outcomes like increased turnover. In this regard, reduced productivity has been noted as a direct result and risk of a demotivated workforce.  For instance, if employees know that they would not get recognition for exceptional performance, chances are they would not be adequately motivated to give their best in their assignments, duties, and responsibilities.  There is also the risk of turnover if employees are not adequately motivated through the recommended improvements to the offerings. Last yet important is the risk of establishing a negative corporate where employees, even newly hired ones would be aware that the firm does not sufficiently appreciate its workforce and as such has in place a wanting total rewards program.

 Evaluation Metrics

The total rewards system would, of course, have to rely on and utilize metrics. These are usually a simple way to track, quantify, and measure key indicators of performance (Carton & Hofer, 2007). The decisions to be supported by the metrics in this regard would help Geico determine which of the programs are viable and sensible. They would also inform on how financial resources should be allocated to the various compensation/reward programs. It would be possible to establish how results and costs related. Metrics to be employed in evaluation would typically describe current situations and compare figures with what the situation has been like before or over time, thus making it possible to quantify both short-term and long-term goals hence measuring progress. They would also give insight into how competitors are doing so that data-driven situations can be made.

The following metrics have chosen for evaluating the total rewards program in its shape as per the given recommendations.

• Total reward costs as a percentage of the total operating cost of the company or simply its expenditure: this would give a picture of how much goes into reward programs so that a scenario does not result where too little or too much is spent on the programs.
• A forecast/ projection of the compensation needs of employees based on the company’s future plans: this would ensure that budgetary allocations to reward programs remain within the company’s capability so that it is not overstretched.
• Reward program costs for every dollar in: computing what fraction of earned revenue goes to reward programs would ensure that the company does not operate on negative margins.
• Analysis of production and performance of employees to whom 60% of the company wage is paid: this would reflect if or not labor gives returns on investment simply by showing whether what is pumped into labor is worth what that labor yields.

Implementation Timeline

Imperatively, the metrics above should be able to give a clear picture encompassing factors such as quality, quantity, cost, effectiveness, and time. In relation to time, it would be important to have a specific timeline for not only implementation but also evaluation. Since most company activities and programs are interconnected, it would be wise to give a year for full implementation so that applying the stated metrics it would be possible to quantify and measure effectiveness after say, a half fiscal year. This has been demonstrated in the implementation task list and timeline (presented as a separate piece).

Summary and Conclusion

In conclusion, it is clear Geico is keen on fostering the relationship with its employees even through its total rewards philosophy. While it cannot be disputed that the firm has done well so far, it is thought the few changes recommended would go a long way in making it more effective so as to yield the much-needed employee motivation, loyalty and commitment. A vital lesson from the activity and course in general has been that total rewards for employees represent a very important ingredient in the employer-employee relationship that significantly influences organizational performance. In as much as employees may give their best in their duties and responsibilities, the employer is equally obliged to ensure they are fairly compensated and adequately motivated as firm output is highly dependent on employee input.

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